Dai Qing and Three Gorges

A Damned Dam

(November 17, 2009) For fifteen years, Three Gorges dam officials have been looking forward to the day they could declare the dam – the world’s most spectacular, and controversial, engineering feat – finished and operating at full capacity.

Now it appears they’ll have to keep waiting as low water levels and drought conspire to slow the filling of the reservoir. But as the project inches towards final closure, the lessons learned and the costs incurred from its construction are being tallied.

That the Three Gorges dam has been a costly mistake is undisputed. The dam has contributed to the extinction of a number of species, hapless citizens have been impoverished through forced resettlement, the Yangtze’s river banks have been destabilized by a rising and falling reservoir, and landslides have become both routine and deadly. Seismic tremors have increased as a result of the reservoir crossing two fault lines and officials now warn of “catastrophe” and are demanding more money to avert dangerous scenarios.

Meanwhile, electricity consumers across China have had to pay a special levy, initially to help build the project, and now to help clean up the mess it created. With the billions flowing through Three Gorges’ coffers, the corrupt and criminal have thrived. Independent estimates put the real cost of the dam at $88 billion, far above the $27 billion quoted by China’s propaganda machinery. By conservative estimates, Three Gorges power costs two to three times more than power from more environmentally benign and readily available sources.

In Canada, the first foreign country to agree to finance the dam, middle school children now routinely debate the Three Gorges dam in their geography classes. Many grumble when they are asked to make the Chinese government’s case for the dam, viewing it as “the losing side.” Canadian school children aren’t the only ones who know there are problems with the dam. Even China’s top leaders now refuse to show their faces at the site – lest their legacy be associated with the dam. Around the world, Three Gorges has become synonymous with “mistake,” “disaster,” “boondoggle.”

To avoid a repeat of the debacle, the California-based International Rivers has called for an independent evaluation of Three Gorges, and environmental assessments of all dam projects in China, before more dams are built in the country. But independent evaluations and environmental assessments were done before Three Gorges was built and they didn’t stop the debacle from proceeding.

Back in the 1980s, imminent Chinese experts were not permitted to voice their arguments against the dam, so Dai Qing, China’s most famous journalist, published their arguments in the landmark book, Yangtze! Yangtze!. After June 4, 1989, the book was banned and Dai Qing was jailed. But this independent evaluation got around and, when the post-Tiananmen Square government tried to ram approval for the project through the National People’s Congress in 1992, one-third of the delegates refused to play their rubber stamp role and either voted against the dam or abstained.

In 1993, the U.S. Bureau of Reclamation, after 50 years of advising the Chinese government on the Three Gorges dam, reviewed the dam one last time, and declared that they were withdrawing support because the dam is “not environmentally or economically feasible.” A Canadian engineering consortium, hired and paid for by Canadian taxpayers to prepare a “bankable” feasibility study (including, yes, an environmental assessment), concluded that the dam was feasible, though their study warned that it would not be economic if it was built to operate at a normal pool level of 175 metres. The Chinese government chose that height anyway in order to maximize power revenues. The Three Gorges reservoir is now at 170.76 m.

If we have learned anything from the Three Gorges debacle, it is that evaluations and environmental assessments don’t stop projects. Rather, these pro forma administrative steps, which are often easy to do, easy to fudge, and ultimately, easy to ignore, give dam-builders environmental “cred” to undercut their critics. As the contributors to Yangtze! Yangtze! explained, the only way to stop disastrous dam construction in China, is to stop the regime in which “those who have suffered are not the beneficiaries, while those who have benefited are not the sufferers.” To an economist, that means “proponents should internalize the costs of their project.” To an environmentalist, it means “make the polluter pay.”

China’s ruinous dam building proceeds to this day, with more than 200 proposed dams on the Yangtze and its tributaries alone. These dams are being built, not because of an absence of independent evaluations or environmental assessments, but because it is in the interest of Chinese authorities and their cronies to socialize the costs and privatize the benefits of dam building. As long as China’s decision-makers need not account – whether in a legislature, a courtroom, or along the river bank – to the people they displace from their homes; and as long as they can dig deep into taxpayers’ and ratepayers’ pockets without public oversight and market discipline, they can force others to pay for the costs and risks of dams. They also protect dam-builders from the costs of their projects by granting them monopoly powers and guaranteeing their revenues from hostage ratepayers.

The Chinese refer to dam-builders as a “benefit group.” And that they are: all benefit and no cost. Is any of this new? Hardly. In its 1992 exposé of the legacy of large dams, The Economist warned “Taxpayers who eventually foot the bill, should look on dam-building with suspicion,” adding, “as always, things look better when some costs are left out.” It was good advice then and it still is.

Evaluations and environmental assessments won’t protect Chinese citizens from more ruinous dam building. But reform of the power sector to make it politically accountable, economically liable, and subject to the rule of law, will. To ensure that “no costs are left out,” state power monopolies need to be broken up, the electricity sector needs to be made competitive, subsidies eliminated, pricing made transparent, costs internalized, and the property rights of all citizens affected by the power sector protected.

Using the power of the state to engineer a shift away from dams to “green” energy won’t work either. Governments are notorious for choosing bad investments for the sake of political interests. In a competitive system where state intervention isn’t distorting the power sector, investments in renewables, conservation, cogeneration, and high-efficiency gas-fired combined cycle generation will be made when and because they are good for ratepayers, taxpayers, and power companies alike. This is sure to happen if the property rights of Chinese citizens are respected.

When they penned their thoughts back in 1989, the authors of Yangtze! Yangtze! understood what needed to be done to secure an economically and environmentally viable electricity sector to meet the power needs of China without destroying the lives of many of its citizens. Now the Chinese government needs to get on with it.

Patricia Adams, The Mark, November 17, 2009

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